Mike Boswell, Plastribution, looks at the reality of gas shortages across Europe on resin supply.
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The constraints on Russian natural gas supply to continental Europe is a cause for serious concern; not only in terms of how the highly restricted supply via the Nord Stream gas pipeline to mainline Europe is impacting price, but also on the availability to consumers who are highly dependent on gas as a primary source of energy. In particular, it is the lack of interchangeability between natural gas and other energy sources at a time when European demand for gas escalates as the demand from homes depending on gas for heating increases, with further uncertainty coming from the severity of winter that will arise. If gas supply becomes critical and it comes down to a choice between gas for heating versus gas to supply industry, then there is little doubt that authorities will prioritise supply for domestic and civil users and restrict the supply of gas to energy intensive applications deemed not to be critical.
Restricted gas supply to industry is likely to impact the petrochemicals sector in Europe, where sites such as Ludwigshafen are amongst the biggest consumers in the region. Whilst supply of standard polymers such as PE, PP, PS, PET and PVC is international in nature and therefore any production shortfall could be met through increases in imports from other regions of the world, it is the more specialist materials that are likely to be impacted if European production is shuttered. This restriction in supply could push the supply/demand balance towards shortage with the inevitable consequence of price inflation.
A less obvious implication of restricted gas supply is the potential for increased plastics usage if the output from gas dependent energy intensive manufacturing process such as glass, aluminium and steel become restricted, either through supply constraints and/or economics. Not only does plastics have an advantage in terms of lower energy intensity in the conversion stage, but plastics processing is mainly dependent on electricity which is not going to face the same availability constraints as gas. If this situation does arise then demand for bottles, containers, and pouches for FMCG applications could increase significantly as manufacturers look for alternate packaging for their products.
Once again it appears that the European plastics sector faces another period of uncertainty, within which the consequences are largely unknown, but as we have seen over the past few years the UK plastics processing sector is robust, adaptable and capable of meeting changing demand needs.